ROCKINGHAM — Green Mountain Railroad wants to build a $3 million wholesale propane gas depot in Rockingham, but local officials are worried about fire safety issues.

Town Manager Willis “Chip” Stearns said Wednesday that the proposal from Green Mountain Railroad, a division of Vermont Rail Systems, has already started preparing the site where it wants to build a wholesale propane depot, which would include three 60,000-gallon tanks.

The propane gas would come to the Rockingham site via a new rail spur, Stearns said.

But he said the town and Bellows Falls Village Fire Department have concerns about providing fire services for the facility, and the lack of any local review of the project.

Stearns said the project does need a letter from the Rockingham Volunteer Fire Department and the Bellows Falls department about providing fire services. He said he had instructed the two fire chiefs to withhold any such letter until more information is available.

While the site is in Rockingham and outside the Bellows Falls village limits, the site, which is adjacent to the Bellows Falls Industrial Park, would be also served by the village fire department and the village hydrant system, Stearns said. But he said the closest hydrant was 1,000 feet away.

The project comes as village voters consider cutting one of the five full-time positions in the Bellows Falls Village Fire Department. The special village meeting, which was called after the proposed village budget was defeated last month, will be held June 24.

Adding insult to injury, Stearns said, the railroad pays no property taxes, and thus wouldn’t pay for the firefighting services. The railroad leases the rails and land from the state, said Chris Cole, chief of planning and intermodal systems for the state Agency of Transportation, and the state doesn’t pay taxes.

Cole said railroad law dates back to the 1860s and largely makes the railroad exempt from any state or local law.

Eric Benson, staff attorney for Vermont Rail Systems and Green Mountain Railroad, said Thursday the railroad had been working with the town and village for more than a month. He said information that the town and village had concerns about firefighting “was the first I’ve heard about it.”

Benson said the railroad helped other communities with petroleum fuel depots in Walpole, N.H., and other towns. He said the railroad would be willing to help with a “one-time” contribution, such as buying a piece of equipment.

Benson said that while immediate plans call for three 60,000-gallon tanks, there is room for seven tanks. He said the project would be a “multimillion-dollar project,” while Stearns put the value at close to $3 million.

Benson said that propane gas facilities were very safe, safer than other petroleum depots.

The railroad had approached property owner Horace Bezanson, said Benson, and purchased his home and recycling center. The house will be turned into an office, an older house demolished and the recycling center building removed.

He said the railroad had helped the Bezansons move to Lebanon, N.H., to be closer to family.

Benson said the railroad had purchased about four acres of land and that site preparation was already underway. He said the railroad hopes to start shipping propane in August.

The state is paying one-third of the cost of the new rail spur that will be built to accommodate the new fuel depot, according to him.

Stearns said that Green Mountain Railroad and Vermont Rail Systems has hired Dead River Co. to manage the facility once it’s built.

The site is between the rail lines and Route 5, he said, and is adjacent to the former Steamtown Rail Museum property, which is now owned by Green Mountain Railroad.

Benson said an earlier case involving a large salt shed on the Steamtown property, owned by Green Mountain Railroad, took the issue of railroads and Act 250 “all the way to the U.S. Supreme Court,” with the railroad winning.